More signs of a weak economy
Data showing an unexpecetd contraction in manufacturing is a further sign that the economy is struggling.
This comes a week after consumer confidence figures released earlier this week and, although mining production was stronger, the gains were off a low base.
Statistics SA showed total mining output growth increased marginally to 7 percent year on year from a revised 6.7 percent in January.
But this improvement could be attributed to the fact that last year February was marred by labour unrest which meant the year-on-year figures came from a low base as output plunged 14.5 percent to 70.8 index points in February last year.
Platinum group metals had the highest production surge at 66 percent year on year, boosting non-gold’s output increase to 9.5 percent. Gold output declined 4.7 percent over the same period.
On a seasonally adjusted basis, mining output was down by 2.5 percent from last month after expanding by 5.5 percent in January.
Manufacturing figures that were released soon after showed that monthly factory production followed the same trend, falling by a seasonally adjusted 3.1 percent in February and by 0.1 percent on a quarterly comparison. Year-on-year manufacturing output volumes fell 2.9 percent, the first contraction in five months.
Some economists said that this was an indication that gross domestic product would remain under pressure as the production sectors were clearly having a hard time.
They also suggested that the improvement in mining production figures might have provided false hope.
But the SA Chamber of Commerce and Industry (Sacci) released its monthly trade activity index which suggested that trade conditions were more positive last month. Sacci said sales volumes of all sub-components of trade activity registered the highest level since November last year, which Sacci suggested reflected that, despite the 13-year plunge in its business confidence index for March, there was still optimism in the economy.
“We are at a turning point. The economy is growing, but not as we’d want it to. That’s why we are having mixed signals,” said Mike Schussler, the chief economist at Economists.co.za.
In his view, mining bounced back and he said the increase of 7 percent should have been 12 percent. In the manufacturing space, Schussler said it was an artificial decline which was underpinned by Eskom buying back power from manufacturers. He said it was iron and steel manufacturers that had the biggest output declines.
He said the economy should come back from where it was in the third quarter of last year, but he was not sure if the first quarter of this year would be better than the final quarter of last year.
The Manufacturing Circle said the decline in manufacturing output was a direct result of complications that included steep increases in water, energy, transport and municipal service costs.
Azar Jammine, the chief economist at Econometrix, said the mixed signals were not surprising because one could not tell much by looking at month-to-month statistics.
“February last year was a leap year so we had one more production day that was not there this year, and March had a lot of holidays,” he said.
Jammine said on a quarterly basis, figures for February showed the economy might have had a big improvement in the first quarter.
“The overall picture shows that we are going nowhere fast, but there is no plunge in the economy either,” he said.
Brad Gillis, the chief executive for regulated products at BankservAfrica, said yesterday that the growth in transactions suggested the recovery was still present.
On the underlying transitions tracked to form the BankservAfrica Economic Transaction index, all indicators were up.